Etihad ups its stake to 19.9% in Virgin Australia

Etihad Airways, the national airline of the United Arab Emirates has upped its equity stake in Virgin Australia Holdings to 19.9% through a number of market purchases it had made in these last few weeks.

Etihad has been on a stake acquisition spree in the past few years as a strategy to build up a network to compete with bigger middle eastern competitors of the likes of Emirates and Qatar Airlines. The airline has built up equity stakes in Air Berlin, Air Seychelles, Virgin Australia and Aer Lingus, will acquire 49% of Air Serbia from January 2014 and, subject to regulatory approval, will acquire 24% of India’s Jet Airways.

Etihad Airways and Virgin Australia have a ten-year strategic partnership that helps code-sharing on flights, joint sales and marketing activities, and reciprocal earn-and-burn on their respective frequent flyer programs. Etihad which started flying to Australia in 2007 with Sydney as its first destination, now covers most of the bigger cities in Australia with the exception of Perth, where it intends to begin services soon.

While this is a good news for Virgin Australia Velocity frequent flyer members who now have a bigger opportunity to burn their miles, It is definitely a concern for the other major stakeholder in Virgin Australia, Singapore Airlines which considers the Kangaroo route as one of big revenue earning routes. With it having recently upped its stake to 19.9% in the Australian carrier in April 2013, having a competitor grab a similar share is not a good sign for things to come. What remains to be seen is about how this will be handled in managing the future direction of Virgin Australia.